The Argument Advanced by Milton Friedman for Adopting a Monetary

question 208

Multiple Choice

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

• A)active monetary policy potentially destabilizes the economy.
• B)the Fed can control the money supply,but not the level of interest rates.
• C)a constant rate of growth in the money supply would eliminate the booms and recessions that make up the business cycle.
• D)the growth rate of M1 has been unstable.

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Definitions:

Lower Bound

A minimum value or limit that a variable, such as a stock price or interest rate, can assume.

Upper Bound

The maximum limit or highest achievable level of a particular measurement.

Call Option

A contractual arrangement providing the holder with the privilege, yet not the compulsion, to acquire an asset such as a stock, bond, or commodity, at a predetermined price during a defined period.

Interest Rate

An interest rate is the percentage of principal charged by the lender for the use of its money, or the rate earned on deposited funds.